Kwacha expected to hold strong

DESPITE most emerging market currencies continuing being under pressure against a strong United States (US) dollar, the Kwacha is expected to hold in the range of K9.60 and K9.70, financial market players have noted. Cavmont Bank says Wednesday’s trading session witnessed the local unit rally come to a halt as it failed to break below the K9.50 level.

“The local unit has continued to out-perform other emerging market currencies which have recently come under pressure against the greenback following indications from the US Federal Reserve that it may hike interest rates soon,” the bank says in its market report.

On Wednesday, the Kwacha opened trading at K9.50 and K9.55 and was largely unmoved against the dollar, with minimal activity being seen from most corporates.

Similarly, First National Bank (FNB) Zambia, in its daily newsletter, says the Kwacha is expected to continue being firm against the dollar.

FNB says it seems the steam experienced in dollar/Kwacha pair over the last few days has died down.

“We are of the view that the current levels will hold although the tide seems to now have shifted to the upside. We see support at K9.60 and resistance at K9.70 yesterday,” the newsletter reads.

Meanwhile, Zanaco in its daily newsletter says the Kwacha is anticipated to trade in the range of K9.70 and K9.90 in the short-term with a bias towards a weaker local unit.

The bank attributes the depreciation to corporate demand for foreign currency as it begins to pick up, though the downside could be limited by support from inflows from offshore investors after a central bank auction for Treasury bills.

On the regional front, the South African rand traded close to the previous day’s seven-week low against the dollar yesterday, hurt by investor concerns over the future of Finance Minister Pravin Gordhan.

The Rand touched an early session low of 14,7385, but clawed back to 14.6850 by 07: 04 GMT, up slightly from Wednesday’s close at 14.720 while the Kenyan shilling was also stable due to subsiding dollar demand from the manufacturing sector and inflows from charities offering support to trade at 101.25/35 compared with 101.30/40 at Wednesday’s close.

Meanwhile, the Botswana pula and Nigerian naira remained unchanged at 10.7941 and 304.5 respectively yesterday from Wednesday.